Suitability: Prioritise periodic investment reviews


Q: How can advisers stay on top of ongoing suitability?

A: Change is inevitable. And this is no truer than in the past few months. The economic and social impact of the Covid-19 pandemic has fundamentally changed the way we do things, and with it your client’s financial priorities, objectives and risk appetite are likely to have shifted. 

Perhaps they have had to push back their planned retirement date. They might need to cash in investments to supplement a reduction in income. As a result, the advice they received just last year needs to be reviewed, making periodic suitability reviews more important than ever.

Ongoing reviews have had additional focus since Mifid II was implemented in 2018. And while the Financial Conduct Authority has not undertaken significant work in this area since, with the current focus on increasing client banks and servicing existing clients, it is only a matter of time before it does. 

So while you might be considering pushing back your periodic reviews, making assumptions about the suitability of ongoing advice could leave your business exposed to costly regulatory action.

After all, if the client is not engaging or benefitting from ongoing advice any more, but you are continuing to charge for it, how can that be deemed a good outcome?

Smart, forward-thinking businesses should be making periodic reviews a priority and adapting their procedures to make sure they get done.

It is more difficult for companies who have significantly increased their client base in recent years, but setting up alerts to ensure you contact clients in good time, and having clear processes in place for those that do not engage, is a helpful place to start.

Then, make sure you are covering the right information in the meeting. This means presenting the right disclosures and documents, getting a thorough understanding of your client’s current objectives and how they might have changed, and updating KYC information, including the client’s risk profile.

Finally, just like with initial advice, you will need to be able to show the FCA how the advice you’re giving is suitable and that an ongoing arrangement still meets the clients’ needs.

Therefore, it would be wise to widen the population of files you are checking during business assurance to include periodic review advice.

Not only will this provide the evidence that you have taken steps to ensure suitability, it will also keep a lid on risk in this area, spotting any unsuitable advice before it becomes a real issue for you and the client.

Granted, an increase in the volume could pile the pressure on internal business assurance teams. But delaying your client reviews or forgoing assurance in an effort to save time or money will only backfire in the long run.



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